Amazon Fever: NJ Could Offer $5B in Tax Breaks to Lure HQ2 to NJ

Posted on September 28, 2017

NJ Spotlight- Lawmakers join in bipartisan push to ease restrictions that could have Seattle-based online retail giant looking elsewhere for a second home

Despite being an election year, state lawmakers from both parties joined a unified push to lure Amazon’s new corporate headquarters to New Jersey, an effort that now involves a staggering $5 billion state-tax incentive being offered as an enticement.

The bipartisan campaign to convince the online retail giant to open a corporate center in New Jersey comes after Amazon officials announced earlier this month that they were seeking proposals from places that would be interested in hosting what would be a second company headquarters to complement its Seattle HQ.

The announcement has set off fierce competition across the country, since Amazon is expected to invest at least $5 billion in what it is calling the “HQ2” project, with an expected 50,000 jobs to be created as well.

Letter from legislators

A joint letter issued by the top legislative leaders from both parties in the New Jersey Assembly and Senate yesterday indicated that lawmakers are more than willing to overhaul existing state tax-incentive programs to ensure New Jersey’s pitch to Amazon officials will be formidable.

“There are many reasons why New Jersey is an ideal location for the HQ2 project, and we are committed to ensuring that chief among them is a strong incentive package,” said the letter, which was signed by Senate President Stephen Sweeney (D-Gloucester), Senate Minority Leader Tom Kean Jr. (R-Union), Assembly Speaker Vince Prieto (D-Hudson), and Assembly Minority Leader Jon Bramnick (R-Union).

Among the changes the lawmakers said they would be willing to make is a lifting of existing per-job caps on incentives, which would allow the state’s offer to balloon to $5 billion. Amazon’s HQ2 could also be declared a “transformative project,” which would allow certain geographic restrictions that are in the state’s existing economic-development law to be eased, the letter said.

“We are committed to bipartisan, legislative action that enables New Jersey to offer a robust and competitive incentive package to Amazon,” the letter said.

Christie urges lawmakers on

The announcement from the lawmakers comes as the full state Legislature is up for reelection this year. It also follows urging by Gov. Chris Christie, a second-term Republican now in his final months in office, for the candidates who are running to replace him in this year’s gubernatorial election to also find bipartisan accord on the state’s effort to lure Amazon to New Jersey.

But officials from New Jersey Policy Perspective, a liberal think tank based in Trenton, reacted to the Amazon news yesterday by calling for caution and a renewed focus on smart investments in the state economy amid the tax-incentive sweepstakes.

“Merely blowing the lid off already out-of-control corporate tax-break policies won’t work — and is dangerous to New Jersey’s future to boot,” said Gordon MacInnes, NJPP’s president.

Founded in 1994, Amazon was initially aimed at selling books online, but it has blossomed over the past two decades into one of the world’s largest companies, with more than 380,000 employees. Its current headquarters in Seattle, where the company started, covers eight million square feet, and Amazon estimates it generates as much as $1.4 billion in direct and indirect economic activity for the city.

Amazon, NJ

But Amazon also already has a pretty significant presence in New Jersey, according to a recent report released by Wall Street credit-rating agency Moody’s Investors Service, opening more than five-million-square-feet of warehousing and distribution space in recent years as the state’s overall warehouse and distribution industry has flourished in the wake of the Great Recession. Existing Amazon facilities are located in Carteret, Florence, Logan Township, Robbinsville, and Woodbridge, and facilities are also opening in Cranbury, Edison, and Logan Township. Amazon-affiliated Audible Inc. is also located in Newark.

A big draw for Amazon’s e-commerce operations, according to Moody’s, is New Jersey’s transportation infrastructure, including the New Jersey Turnpike, as well as the Port of Newark-Elizabeth, the second-busiest seaport in North America. New Jersey also boasts Newark Liberty Airport, and 1,000 miles of freight-rail tracks.

In the wake of Amazon’s HQ2 announcement, Christie administration officials declared that they would be coordinating a statewide effort to lure the company to New Jersey, which already meets some of the top criteria that Amazon said it is looking for, including proximity to major metropolitan areas, significant labor pool with computer-software and engineering skills, and access to mass transit. But Amazon’s nationwide search has also effectively turned into a massive competition among states and cities throughout the country, with each now trying to offer the most lucrative tax-incentive packages to close the deal.

Upping the ante

New Jersey already has several economic-development tax incentives programs in place that have been used to lure numerous companies to the state in recent years, even as some have questioned the billions of dollars in incentives that have been offered up to those companies to ensure their relocation. But the lawmakers made it clear yesterday that they are now more than willing to raise the ante significantly to win the Amazon sweepstakes.

For example, under the existing Grow New Jersey tax-incentive program, the per-job base rate is $5,000, with some bonuses available. But the lawmakers said they would offer Amazon an up to $10,000 per-job base rate. That means the incentive package could be worth up to $5 billion if Amazon creates the up to 50,000 jobs it has said the new facility could generate.

Time limits on job creation would also be eased, according to the letter, and the lawmakers said they are also willing to allow tax credits to be carried forward for up to 50 years. The state also now allows its most lucrative incentives to be awarded to projects being built only in areas that have been designated in most need of redevelopment. They are Atlantic City, Camden, Trenton, Passaic, and Paterson. However, the legislative leaders said those restrictions would be eliminated for Amazon to provide the company “with the most flexibility in selecting its ideal location within the State.”

But MacInnes, the think tank leader, suggested that offering up too many incentives to Amazon officials could end up hurting New Jersey in the long run if the tax breaks make it harder for the state to maintain resources that are at the foundation of its economy, including public colleges and universities, and mass-transit infrastructure.

“If state economic-development officials focus narrowly on tax breaks, they will merely be repeating — and making worse — the mistakes New Jersey’s political leaders have been making over and over since the Recession hit,” MacInnes said. “For New Jersey’s economy to truly be competitive and strong, the state needs to get back to basics: investing in the assets that give us an edge. “